We share the impact of COVID-19 on Balbirnie House Hotel in Fife and the challenges the hotel faced during lockdown.

Hotelier Nicholas Russell shared an honest and transparent text online detailing their personal account of the lockdown and all the uncertainties they faced. Balbirnie House is one of the most well-known and successful independent hotels and wedding venues in the UK.


"It’s a six Zero hit, but we’re ready for the new future", Nicholas wrote.


"Friday 20th March 2020. A night we’ll never ever forget. Shutdown! The next day’s bride had already checked into our Pearl Suite, and it wasn’t even as straightforward as that. You see, the bride and groom had already ‘lost’ their initial intended wedding elsewhere due to the Thomas Cook travel company having collapsed into administration. Our company directors had heard of these tremendously sad circumstances and so we had offered to step in and gift the entire wedding, from Balbirnie House. All I could say to the tearful bride was: ‘We are so saddened we do not have the words, but we will look forward to re-scheduling, and it’ll be the third time lucky!’


After announcing the hotel was closing on social media I put ACDC’s ‘Hell’s Bells’ on repeat on my car sound system at full tilt, and headed home for the night, beginning to think of what we’d need to do to safeguard Balbirnie’s future.  Absolutely devastated for Saturday's and Sunday's weddings, and thoughts immediately with all future clients. 


Poignantly and so very personally, thoughts with our entire brigade, and their families reliant upon income. Families with children. Bills to pay. A few days left before their rent or monthly mortgages would need to be paid. Company directors the source of ensuring it happens. It's easy to panic when faced with such a challenge, but our underlying foundations were strong, so ... shoulders to the wheel and onwards we go. 


Unlike many industry colleagues, we were fortunate in 2020 foundations. Firstly, a few years ago we’d shifted our entire company banking over to HSBC, specifically because of the facts that:

a) they tend not to bank independent hotels (as it’s a high risk sector) - therefore those they do work with tend to already be on very solid financial status, and are fully supported on that basis

b) at outset they were as enthused as we have always been, about helping us preserve and improve Balbirnie House, as one of Scotland’s most treasured Grade A Listed national treasures. 


Secondly, in 2020 we had a sub 40% Loan to Value. 


Thirdly, our company management team had delivered basically, what we were told by CreditSafe Credit Rating earlier in 2020, as the best credit rating they had ever seen for an independent hotel. 


Fourthly, over more than a decade, our company directors had been working with ongoing consensus, that we should do all possible to roll into the future maintaining a continual current account cash surplus, envisaged ideally at between £200,000 and £250,000 - believe me, if you can run a company like this, you can usually sleep at night. The financials are protected, everyone’s job is secured, and prioritised reinvestment is dictated by how much cash you have in the bank, and how much you think you are going to have in the bank! Cash kept in the bank permanently, no overdraft required! 


After shutdown, the assistance from HSBC was immediate, focussed and very resourceful indeed, via Relationship Manager Scott Shankland, and Jan Campbell, Deputy Area Director, Business Banking Scotland. We were immediately offered a most welcome 6 month break from making traditional capital repayments. This was supplemented by immediate and ongoing assistance also, from EQ Chartered Accountant, as partner Mark Gibson has audited our annual accounts for many years. 


Perhaps sections of the general public thought that hospitality industry hibernation costs would be minimal? Today’s Blog certainly defines that’s not the case. 


Without any cash coming in, there are the many suppliers who needed to be paid for previous supplies. To deliver for all employees within the scope of the UK furlough scheme, you need actual funds in the bank, to pay all employees first before then reclaiming. 


To say the least I was shocked beyond belief to see industry colleagues elsewhere immediately losing their jobs back in March en masse, in some circumstances from what appeared to be from the employment of companies run by high net worth individuals, or companies with high asset values. Those who made those decisions will live with those decisions for the rest of their lives. Reflecting on timeline, I know for sure, entire brigades lost their jobs, without employers taking time properly investigating re-financing prior to making that first furlough payment. 


You then have all ongoing fixed costs, financing costs, banking costs etc etc. Any employees still employed would need to be paid regardless. In our circumstances, wedding planning team, accounts, gardening and grounds, and in-house security all needed to keep going. 


Insurance for Business Interruption? All insurers across the span of Hospitality stated they would not provide any payments. As our intermediary insurance broker remarked at the point of Lockdown, 'Insurers won't make any payment, so for the hospitality sector it's going to be the survival of the fittest!' I confirm today that Balbirnie House is now one of hundreds of businesses in potential future combined Class Action via London legal firm Mishcon de Reya. 


We initially calculated that we would be losing £6,400 per day for the first 3 months of suspended trading, and then £3,300 per day thereafter. Thereafter, we would need to make some reinvestments for re-opening, and over and above  that also pay the financial way for cash flow.


Current account surplus, gone in days! Vamoosh! 
CBILs: CoronaVirus Business Interruption Loan scheme via HSBC delivered a new £300,000 debt facility (repayable in 6 years), plus a new £200,000 overdraft facility. Underlined, CBILs is only accessible for companies that can meet specific criteria, including being able to deliver operating budgets and cash flows evidencing ability to repay! 


Then, add the loss of all positive cash flow which would have otherwise been incoming, for April, May and June 2020, extending further until we know when we can fully re-open for non social distancing trading. 


The combined implications are certainly already in the ballpark of £1 million. Setting aside the generalities of the UK furlough scheme for covering wages, how much have we successfully claimed in Grant Assistance? There are seemingly 2,500 Scotland tourism and hospitality businesses with annual rateable value above £51,000, therefore above the threshold for receiving any grant whatsoever. It is totally staggering that this remains the case today. This entire tranche of Scotland tourism and hospitality, basically thrown under a bus. Unless you can borrow more cash as we have been able to do, or have additional cash to hand, you are finished, basically. 


EQ Chartered Accountants recommended we apply for a Grant within the Scottish Enterprise Pivotal Enterprise Resilience Fund, quote ‘for firms which are vital to Scotland’s economy’, and we proceeded with this. It was a significant submission, and we were over-the-moon, and the rest, to be told two weeks later that we had received assistance of £85,000 - whilst less than 10% of the impact we have seen, this sum will be absolutely vital for supporting our successful re-opening. 


So, we are now most thankfully fully financed and ready to re-open. The 2020 financial circumstances will set Balbirnie House back a few years, but the important things to mention today, are that we’re so very thankfully still in business, and we fully envisage continuing. 


Additionally: The hospitality, passion and determination from our wedding planning team has been epic. We have successfully helped more than 80 wedding clients re-schedule with new future Balbirnie House dates, in what is now a rolling program of review, enabled and carefully managed through 18 phases of Policy and Status updates. As and when we can fully deliver non social distancing weddings, it may be the case that in the following 12 months we’ll see Balbirnie House provide the backdrop for 185 weddings. 


Specifically and only from Hospitality perspectives, there will be hotels which are remembered for how badly they handled the pandemic, and to the contrary there will be hotels which are remembered for how well they handled it. Writing today, I certainly know that we've truly delivered our absolute best for every single future client, many of course who have found themselves in amongst the most incredibly challenging circumstances. 


Signing off today, our brigade's hospitality heads and shoulders proudly high, Balbirnie House fully safeguarded, and most importantly of all, our entire brigade 100% intact and ready to get back to serving our community. 


We're starting with brand new external dining on Monday 6th July, with hotel accommodation opening 15th July. Our opening team is 15 strong, and our ability to get the other 70 of the brigade back to work depends absolutely, on how busy we are going to be. 


Thereafter, our company directors are fully committed to the entire future, in the further knowledge that we'll need to be making enhanced outgoing payments, to cover what we've had to do to bring stability and enable re-opening. 


We'd therefore very much appreciate any and every single guest visit ahead. It's also a new future we're now looking at, with completely dedicated online reservations, food and beverage ordering via App, and payments across-the-board via digital as opposed to cash. 


Embracing necessary change, without ever losing sight of where we've come from, and certainly since March 20th, what one and all have all been through. 


On behalf of the brigade, we are together, Yours in Hospitality,
Best wishes one and all, 
Nicholas Russell / MD Balbirnie House"


We wish the entire team at Balbirnie House and every hotel in Scotland reopening this month optimism, resilience and great success.


Balbirnie House Hotel


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